April 1,
2019 by HFBusiness Staff in Business Strategy, Industry 
Most notably, Legacy Classic set up vast, first-of-their-kind consolidating warehouses in the Far East for finished collections. They paired these automated warehouses with a U.S. distribution center for quick-ship items and replacement parts, which dramatically improved speed-to-market, whittling it down from an average of three-plus months to under 60 days. In addition, Legacy Classic removed minimum requirements, offered standard 30-day payment terms and enabled retailers to mix collections and product types. These changes helped retailers reduce both inventory costs and risks.
The ways in which O'Connor and his partners reimagined and transformed traditional manufacturing processes made business easier and more profitable for retailers, and created industry standards that are still in place today.
“It was a game-changer,” said O’Connor, who was inducted into the American Furniture Hall of Fame in 2012 for his transformative leadership in the furniture industry. “We were like a company on fire, and every month we broke another sales record.”
Before adapting their own Legacy-like processes, other manufacturers scrambled to catch up. Don Essenberg, president and chief executive officer of Legacy Classic, said that when he worked for a competitor, it was a challenge following O'Conner in sales meetings. "What they had to offer was hard to beat," he said.
As the company celebrates its 20th year of business, it enters another era of change, shifting from a China-based manufacturing and warehousing model to a multi-sourced, Vietnamese manufacturing model. This major move will allow Legacy to offer a broader product and price point selection.
O’Connor retired from Legacy in 2015 but remains a consultant to Samson Holdings, Legacy’s parent. He and Essenberg recently sat down with Home Furnishings Business to discuss their company's remarkable history—and plans for the future.
Q: What do you think is the greatest contribution Legacy Classic has made to the industry and the consumer over the last 20 years?
O'Connor: It can be hard to think of just one contribution. I think for retailers, I believe our greatest contribution was that our model kept a lot of them in business that might not have stayed in business otherwise. And for consumers, I think we proved the Far East could make a quality product. Our best selling and certainly most profitable product [Louis Philippe] was also a better-end product. So our greatest contribution there is that we allowed the middle market to have an upper-end look.
Essenberg: And, ultimately, Legacy pushed the rest of the industry into contributing in those ways. Back in those days, following Kevin on a call used to kill me as a competitor to his model. In order for other manufacturers to keep up and be competitive, many followed suit.
Q: What are you most proud of about Legacy Classic?
Essenberg: For me, I would definitely say that it's our ethics—how people are treated here, and how they treat everyone else.
O'Connor: Yes—I'm so proud of the people we started with, and the people we work together with now. When we created this company, we wanted everyone to be treated equally. All the people in the warehouse, all the people in the office... we wanted them to feel they were treated with respect and dignity, and like they were part of something. And that showed in how they interacted with our customers. Retailers would call me on the phone and say, "You know, I do business with a lot of companies, but when I called your customer service department and spoke to Mary, I got the feeling she really cared about my problem."
Essenberg: That's true for today, too. Our customer service department understands they're problem solvers, not a police force. We love them. And we love our salesforce—they aren't a necessary evil. You need good people, and Kevin understood that when he founded the company. We're all one team, and that's just as true today as it was then.
O'Connor: I think that's what I'm most proud of—the integrity we've had as a company. We always try to live up to what we say, whether it's to employees or customers.
Q: With top-selling lines like the Louis Philippe Collection-Vintage, which popularized high-end design for middle-market consumers, Legacy Classic has been known over the years for its focus on thoughtful product design. Would you say this is still a focus for Legacy? Do you see an emphasis on high-quality product design in the industry as a whole?
O'Connor: Somewhere in the mid-90s, life started to become more causal—even formal became more casual, which I know is an odd thing to say. We created Louise Philippe as a bridge between the formerly popular 18th century style and the newer, more casual look. It was softer. It wasn't fussy; it was more livable. And it was just what people were looking for. Another company tried to produce something similar, and it was a dismal failure. But we built a better mousetrap. We softened the lines and experimented with the veneer. We combined styles, putting a Queen Anne leg on a Louis Philippe dining set, which no one had ever done before. But the world liked it; it really took off. That's still our mentality—to know where consumers are and to create good designs that meet them there.
Essenberg: There are a lot of manufacturers competing just on price these days, but what we want to be able to do is compete on fashion, too, and to create value for what it is people want. You don't have to be the least expensive, but you should be the best value for what you're offering.
Q: Whether it's manufacturing, logistics or product design, Legacy Classic has been disrupting the industry for two decades by reimagining and refiguring the status quo. Who do you see as other disrupters in the industry right now?
O'Connor: I don't think there are a lot of disruptors on the manufacturing side right now. I think there are disruptors on the retail side, and it's really coming from the consumer. The business is different today. You're not selling, at any price point, as many packaged suits as you once were. The Internet has changed things. Consumers are exposed to more, and the young consumer today wants to be unique. That's not new, but there's now more accessible to them. Retailers have to be able to deliver and compete in that environment.
Essenberg: Today's consumer is a collector. She doesn't want to just go in and buy a four-piece bedroom; she wants to collect a bedroom with different pieces to make it hers, as opposed to what everybody else has up and down the street.
O'Connor: That's why some of the major disrupters you see at retail are specialty alternative stores that present an aspirational lifestyle. Furniture is only part of what they sell, but they tie together a lot of different elements that create excitement and inspire. I think that's a missed opportunity for a lot of retailers today.
Essenberg: As part of our reimagining, our job is to assist retailers in this area. It's not just a bed or dresser or mirror we're selling; it's a collectable hall piece or a unique cocktail table. In product development, we're creating pieces that are unique in their own right, as well as fitting with a collection. It's as much an art as it is a science—and it's being close to the consumer and how she lives.
Q. What is the next big change on the horizon for Legacy Classic?
Essenberg: It's important to note the things that haven't changed and won't change. It comes back to what Kevin started. Legacy is a very ethical, enthusiastic and entrepreneurial company, and that will continue with all the changes in the business models and retail environment. It hasn't changed in the past 20 years, and it shouldn't have changed 20 years from now.
But to survive in this business, we also have to be constantly reimagining. Our new business model is an example of that. As far as we know, no one is attempting what we're doing, which is literally transplanting our company completely. We're not doing it through a transition where we're moving some of our product; we're literally plucking the business out of China and putting it in Vietnam. That's an ambitious undertaking. It takes a lot of imagination to pull it off, but it's working and it's going to be really important to the history of our company. Twenty years from now, this will be one of the things we'll be talking about.
March 11,
2019 by HFBusiness Staff in Business Strategy, Industry
As you would expect, we twist and turn the topic, gathering input from those involved in the topic, including providers, retailers, and manufacturers. Most important is input from consumers provided by ongoing research from our research arm, FurnitureCore.
With this issue, we addressed delivery to the consumer, often called the “final mile.” However, today that final mile has become 1,000 miles for some consumers that purchase through the ecommerce distribution channel. Does this make a difference?
A good argument to be made is what difference does another 1,000 miles make when the product has already moved 12,000 miles from its point of manufacturing?
We believe it does. Home furnishings and specifically furniture used to be and still should be a personal purchase, not a commodity to be procured, used, and disposed. Manufacturing offshore impacted our product. The decisions about construction, scale, and design process with production 12,000 miles away have been influenced by logistics.
As a young engineer in the industry, I questioned why we need hundreds of different size wooden drawer glides when standardization would reduce costs. I often lost discussion to the design team. Today, I would have won— but the wooden drawer glides have been replaced with metal.
It has been a while since we discussed coordinating parts from offshore. Have we solved the problem or is it just easier to discount and dispose of the product? With the e-commerce distribution channel, defective products, and especially bedding, the consumer is instructed to dispose. In many communities, shelters decline when bedding is donated.
Are we sending the wrong message to our initial customer, the retailer, and our ultimate customer, the consumer, that our product has less value? I realize it is more efficient, but is it the right message?
The industry espouses the importance of retail experience, but what about the experiences when the consumer receives their new furniture delivered “blanket wrapped,” carefully deluxed by the company delivery team exhibiting the same value communicated in advance by the retailer?
And what about the retailer that visits the plant to observe the meticulous detail the manufacturer goes through to insure quality?
Maybe we should concern ourselves with relationships between manufacturer – retailers – consumers in addition to the retail experience.
Shown below is a key performance indicator for sales per handling employee—maybe we should spend more to convey the value of our product.
March 11,
2019 by HFBusiness Staff in Business Strategy, Industry
The Rendezvous in Memphis, with their delicious barbeque ribs and mouthwatering fixings is a good example. The physical space is unremarkable, but it has an ambiance that is created by the anticipation of great food.
There is a long list of such restaurants: Joe’s Stone Crab in Miami; Morton’s in Chicago; and Lusco’s in Greenville, MS. Some are still owned by the same families, others sold. Some have continued to deserve their acclaim; others have declined with only a past reputation to support their demand.
However, today’s technology has permitted patrons to gain immediate access to the food of their choice, eliminating the sense of anticipation. Yes, you can enjoy Rendezvous’ ribs the very next day simply by navigating to hogsfly.com placing your order and entering your credit card.
The foil packaging, with its space-age design, fails to visually excite. Even in my Viking oven, the warming of the ribs cannot compete with the mouthwatering thought of the blackened ribs straight from the flames of the grill. No matter how hard you imagine you are not in the alley downstairs behind South Second, in Down Town Memphis.
Despite all of this, the convenience and experience of this instantaneous delivery process has caused a ripple effect throughout our digital age. The delivery process is changing right before our eyes.
Now, let’s get back to furniture and specifically, back to delivery After the Sale.
The furniture retailer, regardless of their distribution channel, is faced with an important question each time they pursue their delivery strategy: what is the perspective of the industry consumers?
In the last 25 years, the furniture industry at retail has deviated from the dominance of national chains (JC Penny, Montgomery Wards, Sears); department stores (Macy’s, Bloomingdale’s, Rich’s); and independent furniture stores (mom and pop’s). Instead, lifestyle stores (Pottery Barn, Restoration Hardware), mass merchants (Ikea, Wal-Mart), and e-commerce distributors (Wayfair, Amazon) have emerged.
Each of these distribution channels has purveyed products at price points to its targeted consumers, with the final step being the delivery into the customer’s home. For the most part, even though traditional retailers may have transitioned from “mom and pop” stores to multi-store regional chains, they have maintained their own delivery operations.
The other distribution channels have migrated to third-party delivery services. In the case of the lifestyle retailers and department stores, their national distribution networks serving multiple stores, have made this a necessary strategy.
With the e-tailers, delivery has become the key strategic function. Successful e-tailers understand the customer’s journey as a result of replacing “brick and mortar” with a web presence and delivery. When it comes to shipping, customers want affordable prices, flexible shipping options and fast delivery. The long-term success of e-tailers depends upon the efficiency of their delivery in terms of costs, returns and damages.
The consumers’ satisfaction with this last step in the buying process is critical in maintaining the loyalty of the customer. The lifestyle value of the furniture customer (net revenue attributed to the entire future relationship with a customer) is $45,000+ for consumer households greater than $50k.
Traditional retailers have used the delivery process as a strategic strength to differentiate themselves from other traditional retailers and other distribution channels.
According to a survey conducted for this article by FurnitureCore LLC, the research arm of Home Furnishings Business, 78% of traditional retailers consider delivery as a major part of their strategy. More specifically, 11% focus on next day and 18% on “white glove” with product placement. (Graphic A)
In fact, according to Keith Koenig, CEO of the powerhouse retail chain City Furniture in Florida, “We started same day delivery seven days a week in 2002 and it has been a cornerstone for us since then.”
The consumer is not as demanding. The accompanying graph shows only 25% wanted immediate delivery and 41% expected less than a week. (Graphic B)
To accomplish immediate delivery the retailer is required to have product in stock. From a consumer’s perspective, for the product they purchased, it was in stock 73% of the time. (Graphic C)
Of course, having product in stock on the wide selection of furniture in a typical retailers’ store results in poor inventory turns, resulting in poor return on investment. Typical inventory turns are shown in the graph below. (Graphic D)
In addition to being an important element in a traditional retailer’s marketing strategy, delivery can be an important contributor to profitability. The graphic below provides an important key performance indicator (KPI) — delivery revenue per sale. (Graphic D)
In the aforementioned survey conducted for this article a sample of small (<$5m) and large retailers (>$100m), showed 46% of delivery charges were above $50. (Graphic D)
Of course, not all products are delivered by the retailer. According to the consumer survey, 32% of purchases were picked up by the consumer. (Graphic E)
Trucking today is not an easy, functional area to manage. In our survey of retailers, two challenges broke down almost equally between personnel and scheduling. (Graphic F)
The loss of key dispatchers or senior drivers is often the reason traditional retailers consider third party delivery.
Scheduling is an area that can be greatly assisted with technology. Dispatch Track, a dynamic routing and field service management company, has worked as a solution for many small to medium retailers. K.B. Madan, director of sales states, “Not only will number of deliveries daily improve 15-20% because of routing efficiencies, fuel cost will decrease 10-15%. An easy to install solution.”
Part of the scheduling issue, especially with the smaller to more middle-sized furniture retailers is the number of trucks. It is hard to schedule when you are limited to 1-2 trucks. An interesting KPI is the square feet of truck space per sales volume. (Graphic G)
Part of the issue is what is defined as delivery. From the consumer perspective, it is simple— you remove the box from the warehouse, put it on a truck, and bring it to my home.
It is natural for consumers to question the delivery charge—after all, they shelled out on average $1,400 for their purchase, and now you want another $100 bucks. This is exacerbated by the e-tailers screaming “big stuff ships for free” – but what does that mean? In a box, first dry space.
Surprisingly, only 54% don’t understand based on our survey. However, 42% of retailers say consumers accept this when explained. (Graphic H)
Only 7% push back when you charge for delivery, but a significant 64%, are ”somewhat” concerned. (Graphic I)
Again, what is delivery? An overwhelming majority (96%) of retailers in our survey had to deluxe the product (unpack/touch up/wrap) before delivery to the consumer. (Graphic J)
If “out of box” quality could be achieved, it would be a significant savings to the furniture retailer. Currently, on average for every sales dollar a handling employee is required.
For many of the new distribution channels, such as lifestyle stores, mass merchants, and especially e-commerce, poor quality at the consumers’ homes means a return—a financial cost, but as important, a dissatisfied customer.
While the opportunity to deluxe has not been part of the process for the new distribution channels, the consumer is demanding assembly. The recent acquisition of the small assembly company Jack Rabbit by Ikea is an attempt to satisfy that demand.
A major question is should a furniture retailer outsource delivery?
Third party providers’ perspective will challenge whether traditional retailers should continue to maintain that link with the customer. “Elevated consumer expectations”. “An evolving industry”. Those are just a couple of descriptions by third party logistic providers specializing in furniture delivery about the current furniture home delivery landscape. Consumers increasingly expect and demand more from retailers and from delivery companies. Many are willing to pay for the soft touch of white-glove delivery. Waiting more than a few days for delivery is no longer tolerable to many consumers.
Buying mechanisms have changed, and so have delivery processes. Omni-channel retailing has given consumers many more options for purchasing furniture. White glove delivery service is trending upward for delivery companies. Many consumers don’t mind paying extra to avoid the hassle of unpacking, assembling (if required), and disposing of old furniture and packaging.
Buying furniture is sometimes described as a controlled process. The consumer and retailer both have control over what happens up until the purchase is made. But what comes after the sale cannot always be controlled. There are too many variables, and delivery scenarios can be entirely unpredictable. Many factors can affect and disrupt a delivery. Perhaps it’s the weather, or maybe there is a terrible traffic problem en route to a consumer. Barking, and potentially dangerous, dogs may be a hindrance. Sometimes an adult is not home when furniture is delivered. Perhaps a door is too narrow to squeeze large furniture through. All potentially can cause delays.
There’s also the seemingly ubiquitous millennial factor. All industries, including logistics, are developing strategies to solve this puzzle. Millennials demand transparency in their transactions. They want all the details of their delivery, including the day and the time, and they typically want this information available on their smartphone. Millennials are also less willing to wait on deliveries than older generations.
Tossed into this mix is the nationwide challenge of finding qualified truck drivers. That shortage affects every industry, and furniture is no exception. Many veteran drivers are at or near retirement age. The driver shortage has become acute in recent years, and trucking companies have yet to find a solution. That further complicates the process.
For the past two years, studies by the American Transportation Research Institute (ATRI) have placed the driver shortage as the top critical issue for the trucking industry. An aging workforce increases pressure on carriers to recruit and retain the best talent, ATRI says. That’s true whether the haul is long or short. Those figures support the findings of a recent FurnitureCore survey of retailers. Many cite personnel as their top challenge for a successful delivery.
That’s especially true for companies specializing in the final mile. Not only do drivers have to possess the brawn to carry furniture where it needs to go, they also must possess the prerequisite people skills needed to keep consumers happy with delivery. That’s the biggest challenge for many logistics providers. “Soft” skills have been a buzz word in relation to delivery personnel for a few years, but those highly sought-after attributes continue to gain importance. Logistics companies say these skills are absolutely necessary for drivers who enter homes and set up furniture in bedrooms and living rooms.
Also complicating the process is the ongoing consolidation of the logistics sector. The industry has been in flux for several years, and mergers and acquisitions are likely to continue. Big companies are getting bigger and smaller ones are searching for their niche.
Playing no small role in the driver shortage conundrum is the difficulty in finding driver applicants who can pass a drug test. Exacerbating the drug issue is the fact that many applicants also have poor driving records, making it difficult to find qualified delivery teams.
“Lots of companies take the risk of not properly qualifying them, but as a national 3PL we can’t take that risk,” says Rob Davis, chief client officer for Warrenton, Va.-based third-party logistics provider Diakon Logistics.
Rick Lee, chief operating officer for Seko Logistics, says the shortage has definitely had an impact, and it has affected some markets more than others. Illinois-based Seko has 120 offices in 40 countries. “We are working to come up with programs and working with our partners,” Lee says. “We try to get out in front of it if we see markets that are growing. We have a diverse number of trucking companies we can work with. We pay and we are well-known for paying well. We pay fast and we pay well.” Lee says the challenge is especially acute with regard to putting together local final-mile teams. This isn’t because the percentage of failed drug tests is growing, but rather the supply and demand dynamic has grown and any failed drug test delays scaling.
Most of Seko’s drivers are not doing long haul, cross-country trips, but are driving box trucks or sprinter vans, performing final mile and white glove deliveries in a single market. “We are able to retain these drivers because they are home every night,” says Brian Bourke, Seko’s vice president of marketing.
Davis says the backend is where furniture retailers, and their logistics partners make or break their business. “Retailers are predominantly family and their business is predominately regionalized,” he says. “They usually work out of just one distribution center. They have gotten really good at advertising and they have gotten really good at merchandising. They have figured out their business model and the thing they are passionate about.” Davis says the difference between businesses that make it and those that don’t is the ones that do know how to manage the backend of their operation. “The more you are able to understand the backend and get involved and the more you invest in it, the more you can make in it. I want to impress upon people the need to really look into the back end of their operations, and understand that if you can develop really good delivery teams, you are going to improve your experience and you will be able to take care of your customers, and if you take care of your customers they will come back.”
Diakon, at 95 percent, is almost exclusively a white-glove service. According to Davis successful retailers are still able to differentiate themselves by helping consumers understand the value of having furniture delivered and set up. Fully integrated technology solutions offer the best hope for overcoming delivery challenges. “If you don’t have the right solution then you pay a premium to manage the process and inefficiencies occur with product throughput. Matching workforce supply with volume demand has a direct impact on cost, service levels and speed.”
Seko, which serves a core group of about 50 furniture retailers and brands, but mostly non-traditional retailers, has deployed several technologies aimed at improving the final mile experience. This includes its Interactive Voice Response System (IVR), which generates a call to consumers to inform them their goods have arrived at the Seko destination station and they can schedule a delivery appointment. Seko says this helps reduce the window for “buyer’s remorse,” lowering the number of returns. The company also offers online scheduling in most major U.S. markets, enabling consumers to schedule a delivery appointment online based on their zip code.
Diakon’s technology includes proprietary web-based software called Trak-R, which is used to measure, monitor and manage delivery data from the time an order is received through processing of contractor settlement.
Consumer confusion about the delivery side of buying furniture online notwithstanding, e-commerce furniture sales continue to propel business for logistics specialists.
“Online furniture sales are making up a larger part of the furniture retail industry and because of that, more 3PLs are offering services to this industry,” says Cathy Morrow Roberson, an Atlanta-based logistics consultant. “XPO Logistics, for example, has built a network of 85 XPO last-mile hubs in North America that are close to approximately 99 percent of the U.S. population.” Roberson says fast delivery and technology tools that provide visibility throughout the delivery or return are necessary to meet the needs of consumers as well as the retailer – scheduling of delivery, tracking the shipment, and follow-up to ensure the customer is satisfied are the basics of many of the technology capabilities that are used.
Diakon delivers more than $2 billion in furniture annually and focuses on the top 100 retailers. Less than 5 percent of deliveries come from e-commerce sales, but there are many traditional brick-and-mortar retailers who also sell online. “Some retailers, like Bob’s Discount Furniture, for example, sell online and a customer may never go into the store,” Davis says. “They have the option of going into a store, but we just happen to deliver to someone who didn’t. E-commerce is growing significantly, but it’s still a small percentage of the overall business that’s out there.”
Davis says that while data shows that millennials want their merchandise in rapid order, he believes it’s more important to ensure the delivery is done right than to rush out with same-day delivery. “Millennials are also interesting because they want options,” he says. “Many are willing to do more when it comes to their delivery if they feel they are getting a good deal. They will accept a delivery to the door and then deal with unpackaging it and setting it up if they save money.”
Delivering furniture ordered from a computer or a smartphone puts added pressure on logistics teams. For consumers ordering furniture online, the delivery team is likely their only interaction with other humans during the process. They don’t meet a sales associate and they never see someone greeting them at the store’s door. Whatever the method of purchasing furniture, the best retailers are fully integrated with their logistics providers, according to Davis. “If there is a vendor-purchaser relationship, the results will suffer. Where true partnerships exist with transparency and understanding of challenges then better solutions will be available. There has to be a full understanding of what expansion looks like, what solutions are being sold, volume projections, etc. Then the right model can be built to support the business.”
Bourke says millennials may have kick-started the transparency and visibility movement a few years ago, but now all generations expect it. He says, “The rise of technology with Amazon and Uber have changed the game and raised expectations about transparency. Today, transparency means more than just a tracking number. It’s been integrated into your smartphone, through text messaging and notifications from the apps you have downloaded from retailers. You can now visualize exactly where the driver is and have ability to communicate with the driver regarding any changes. That’s what visibility and transparency mean today. There’s been an entire digital transformation. It’s not just about the millennials. Changes are being driven by the consumer, period.”
Seko is on the other end of the e-commerce spectrum with online sales accounting for 100 percent of its furniture delivery business. Like many delivery companies, Seko seeks consumer feedback. Lee says his company likes to do post-delivery surveys if clients allow it. Some don’t allow it, preferring to do their own surveys. But between those two methods, Seko brings all the data together to analyze what consumer are saying. “If it’s a complaint, we are absolutely all over it,” Lee says.
About 20 percent of Seko’s heavyweight home deliveries are the white glove variety and that percentage is steadily increasing. “Many clients don’t offer white glove service as an upsell option,” Lee says, “but when they do, consumers will usually request it. There is a high percentage of consumers who will pay for it.”
Bourke says offering white glove is an upsell opportunity for retailers and brands looking to differentiate themselves. He says it becomes a front-end e-commerce conversation just as much as it becomes a transportation conversation or a logistics conversation, and that is part of the changing dynamics.
Lee predicts that within a few years, final-mile service will account for 50 to 55 percent of Seko’s home delivery business. “I foresee that there will be more opportunities for us to be able to help our clients make deliveries from their regional distribution centers to a consumer’s home, either same day or next morning,” he says.
Seko instituted a “Save the Sale” program, which Bourke says has been transformative for retailers who take advantage of it. “When you have a $1000-plus item that weights 100 pounds, getting it to a consumer’s home is a costly and long process,” Bourke says. “If there is any damage to the box, a nick or a scrape on the leg of a couch, there is disappointment on the part of the consumer because they want their product in mint condition. For example, if a consumer receives a box and there is a hole in the box and the consumer refuses delivery, our Save the Sale program then kicks in. Our driver will initiate a call and connect the consumer directly to customer service and the driver will wait to have the consumer open the box, and view the item inside.”
Bourke says if everything in the box is fine, and the consumer is happy, that mitigates the return and the return process, which can be very costly. If there is a nick on the leg, they can schedule for an aftermarket delivery repairman to come by and fix the leg. “It may even involve offering a gift card, whatever it takes to make the consumer happy and prevent the return process from happening,” he says. “It’s been a differentiator for us, but it’s something smart that retailers are starting to ask for.”
Davis describes the logistics business as segmented. There are a handful of large publicly traded companies, a few dozen companies about the same size as Diakon and lots of “really small guys”. He says the only way to gain a competitive advantage in the industry is by being customer-centric and being able to understand them. “The bigger a company gets, the more difficult it is to understand the customer,” he says.
Davis describes Diakon as nimble enough to successfully react to moves made by other players in the industry. When Amazon announced they would increase their minimum wage, Diakon increased pay for its warehouse staff beyond Amazon’s new minimum wage of $15 per hour. “We are able to quickly react to some of those things and I consider that a big advantage. We are one of the largest 3PLs out there, but we act like a small business.”
In the end, just because you can (deliver), doesn’t mean you should. There are many factors to take into consideration. But, for the consumer, delivery is an important part of their purchase and the overall buying experience. We need to make it memorable in a positive way. We can’t afford to have them lose the savory experience of eating smoked ribs at Rendevouz as opposed to re-heating them at home. The taste may be similar but the experience isn’t.
March 11,
2019 by HFBusiness Staff in Business Strategy, Industry
One of the first things that we should do when we try to assess our performance and determine where growth can come from is to make sure that we are capturing as much of our “low hanging fruit” as possible. However, I have found that businesses sometimes end up taking these opportunities for granted. They assume that they are getting the most from them, when in fact, they are not. We all know what happens when we assume or take things for granted, we usually end up forgetting about or neglecting them, thus failing to maximize our potential. So, I thought this month we would take a look at some of our “low hanging fruit”, to make sure we are doing all we can to harvest it, beginning with the biggest one, which is building a client base with after sale follow up and communication.
Build Your Client Base
As we wrote a few years ago: A customer is someone who purchases merchandise from your store. The salesperson acts as a facilitator in the process, handling the details of the transaction. If no relationship has been established, the next time the customer needs furniture the odds are that she will not seek out that same salesperson. There is, in fact, substantial research to indicate that more than 75% of these people will not even shop your store.
A client, on the other hand, has established a relationship with a salesperson based on the customer’s belief that the salesperson truly cares about her need to create a beautiful home environment and about her level of satisfaction with what she buys. These relationships take time to develop and involve active participation by both parties but mostly by the salesperson. When this customer is ready to make another purchase, she returns to that particular salesperson. It would not matter where the salesperson worked. People do not build relationships with stores -- they build them with people.
While the initial sales experience is critical, it is after the sale follow-up that really builds the trust necessary for the relationship to flourish. Customers want you to track and follow up on their orders after delivery. One of the issues that comes into play in all of the research we see, is that customers don’t think a sales person cares about them at all after the sale is made. For most furniture salespeople, there is ample evidence that this is true. Few send thank you notes, even to their biggest customers. Even fewer maintain contact with customers prior to delivery. In cases where there is contact, it is usually initiated by the customer. Professional salespeople act differently, and the results show in higher incomes and more satisfied, repeat customers. For them, following up with the client after the sale is the critical point where the relationship is cemented, and the consumer’s trust is verified.
Returning customers have a two to three times better chance of purchasing from you, than first time visitors. So, getting those that purchase from you to come back and do it again, presents arguably the greatest potential for business that we have. Are your sales people doing all they can to get the most out of everyone they sell?
Maximize Your Sales from Inquiries
Many sales people do not like handling phone or internet inquiries because they think they are a waste of their time. That could not be further from the truth. These customer contacts actually represent some of the most qualified leads your store receives and because of that qualify as low hanging fruit. However, managers need to make sure their staff members are on the same page and understand what a great potential source of business internet inquiries present. Here are the issues they will want to discuss:
- These are not just “tire-kickers” or “price-shoppers”. They are legitimate Ups and need to be treated as such. They have decided to buy something, done research online to narrow it down and now they are looking for a place to buy it. What better chance can you get? Research shows that those inquiries your staff gets have an extremely high purchasing rate when they do visit.
- For the most part these “inquiries” represent the best selling opportunities a sales person in a retail store will have on any given day because the customer is actually looking at a product and willing to tell you what they are interested in. How many of the people the salesperson approaches in the store each day do they even get that information from?
- These potential customers are normally in the final stages of making a purchase decision and are at a point where they are narrowing down what product they want, how much to pay for it and where to buy it. Therefore, if they ask for a price and you just give it to them, you have only addressed one part of their need and they may very well shop around and go elsewhere to buy, based solely on price. Your response must address all their needs and in doing so, give them a reason to buy from you.
- It is critical that sales management understands that most retail sales people are more comfortable working face-to-face with a customer so they can read body language and relate better to that person’s communication needs. Working with someone online is far different and might not be something every sales person is good at doing. The main point is that some sales people will be better at handling online inquiries. Find out which ones can do it and make sure they get the majority of these precious opportunities.
Use Referrals to Build Your Business
It is estimated that potential customers who are referred to a retailer or service provider by someone they know are highly likely to make a purchase at that store. If your staff is doing things right and building a client base, then one of the ways they can grow it even more, is to ask their clients to refer people they know to them. It is not hard to do, but for many reasons a lot of capable sales people do not bother to do it. Managers need to make sure their client development training program includes dialogs and coaching on how to properly request referrals from everyone they sell.
Partner with Outside Designers
I am going to steal the words to describe this opportunity from our editor’s note as it appeared in the February issue: “While the decline of brick and mortar retailers has been well documented, the number of designers has increased significantly. The majority of this increase is not with design firms employing more than 5 designers, but with individual practices. I hate to use the term ‘kitchen table designers’ because they are as well trained as graduates of major schools. What they are can be best described as personal shoppers. Willing to do the ‘needs analysis’ with the consumer and shop for the time-starved two household income family.”
Why not reach out to these service providers in your community and get them on your team by offering an easy way for them to use your store as their main product resource? It might not be the lowest hanging fruit, but it is sure ripe and available!
New and Existing Home Buyers and Apartment Renters
We all know that in general, people who have moved into a home or apartment recently are more likely to purchase home furnishing in the next few months than those that are staying put. Many retailers in our industry have a program to encourage real estate agents to refer clients. Some provide products for staging in rental units, in order to make a connection with those potential buyers. Unfortunately, I often see that over time these efforts are not always as robust or consistent as they should be. It takes energy and discipline to maintain these programs and make sure you are getting the most out of them, so sometimes they fall by the wayside. Owners need to make sure they hold management accountable for keeping customer recruitment processes like this rolling along. Monthly reports, weekly discussions and a reasonable goal process are ways to keep them top of mind.
I am certain that none of the above items are new to the reader. It is very possible you may not think of them as “low hanging fruit”, but in reality, they are just that. All it takes is a solid plan and a consistent effort to grow your business substantially. Even if you think you are doing all you can, I highly recommend you revisit your programs in these areas to make sure they are giving you the bountiful harvest you deserve.
March 11,
2019 by HFBusiness Staff in Business Strategy, Economic News, Industry
Overall, personal consumption expenditures have risen 41.6 percent post-recession with the majority of consumer spending – roughly two-thirds – absorbed by services and the amount increases every year. According to the government’s Bureau of Economic Analysis (BEA), Healthcare costs now surpass total housing expenditures at $3.10 trillion versus $2.98 trillion in 2018. Combined healthcare and housing consume much of America’s paychecks. Although services will continue to eat away at consumer dollars with rising housing rents and mortgages, overall consumers are confident in the economy. Spending on durable goods is on the rise and has increased by 44 percent since 2009. Consumer spending on furniture alone has increased 7 percent over the last year to $114.6 billion in sales outpacing the growth other home furnishings products.
This article picks up from Home Furnishings Business July 2017 issues’ Statistically Speaking Consumer Spending Update. A comprehensive historical revision to Consumer Spending statistics in the second half of last year by the BEA confirmed what many furniture retailers tried to tell us all along. Specifically, that growth in furniture spending coming out of the Recession ending in 2009 was not as robust has first published (Table A). The Bureau of Economic Analysis lowered estimates of furniture spending beginning in 2011 and which has cumulated to an 8 percent correction that has carried through 2018.
Services, Durable, and Nondurable
Over the last five years, between 2013 and 2018, services have increased to 68.8 percent of consumer spending – from $7.6 trillion to $9.6 trillion in consumer dollars (Table B). Nondurables have declined as a percent of spending, down from 22.2 percent to 20.7 percent during the same time period. While spending for durable goods has not shifted as a percent of consumption since 2013 staying at 10.5 percent, total sales have increased by 22.7 percent.
As shown in Table C, both durable goods and nondurable goods lost tremendous ground from 2000 to 2009 as spending on services skyrocketed by 54.6 percent while consumer spending on housing and healthcare services steadily increased. On a positive note, in the years following the recession (2009 to 2018), durable goods have surpassed growth in services and nondurables, increasing 44.2 percent compared to 44.0 percent for services and 32.9 percent for nondurables.
Top Consumer Spending
Healthcare now exceeds total housing and home furnishings – accounting for 22.2 percent of consumer spending in 2018. The share for total housing and home furnishings has also increased slightly by 0.2 points, mainly due to rising rent and mortgage prices in a competitive housing market. Motor vehicles have dropped spending share by 1.2 points. Meanwhile Americans are eating out more, with corresponding spending on food/groceries consumed at home declining. In 2018, consumers were spending a greater share of expenditures on financial services – up 5.2 percent from 4.9 percent in 2013 (Table D).
Housing and Household Expenditures
Since the recession, renter-occupied housing has surged as the fastest growing housing expense – up 86.4 percent since 2007 (Table E). Both household insurance and owner-occupied housing expenditures have also grown at a fast pace, increasing by 40.8 percent and 47.5 percent respectively. Major household appliances have shown steady growth, while televisions have fallen flat and outpaced by other household spending. Surprisingly, tools and equipment for house and garden have skyrocketed the last few years – jumping 43 percent since 2012.
As Americans are staying put longer, household maintenance spending has grown an average of 4.8 percent a year from 2011 to 2016. 2016 to 2017 saw a dip (-0.8 percent) in housing maintenance but the numbers picked back up last year – growing 3.8 percent. Last year, rents and mortgages both saw a high growth of 4.5 percent and 4.4 percent as supply continues to tighten in many areas. Furniture has shown the most growth over the past year, rising 7 percent after an average yearly increase of 4.6 percent from 2011 to 2016.
Figure 1 itemizes the growth of housing and home furnishing expenditures five years 2011 to 2016 (CAGR), one year (2016 to 2017 and 2017 to 2018) and one year point change.
Furniture and Home Furnishings Products
In 2018 through November annualized, consumer spending on furniture alone totaled $114.6 billion dollars. Major household appliances is the second largest home furnishings spending category at $41.4 billion, followed by clocks, lamps, and lighting fixtures at $39 billion and televisions at $31.7 billion (Table G).
Although window coverings is the smallest of the home furnishings categories, it has experienced the largest post-recession surge in consumer spending – increasing 67.7 percent since 2007.
Table G depicts the decline of all the major furniture and home furnishing products from 2007 to 2009 and subsequent rise post-recession. Spending on carpets and other floor coverings, the most affected home furnishings category, has slowly increased since 2012 but still shy of 2007 expenditures. As of November 2018, spending on furniture is 13.7 percent higher than pre-recession amounts in 2007.
As depicted in Figure 2, all home furnishings categories except for televisions exceeded 3 percent average annual growth from 2011 to 2016. Spending on televisions had an average loss of (-0.2 percent) over five years but has rebounded slightly – increasing 4.3 percent last year. By far, furniture and window coverings have shown the most consistent growth from 2011 to 2018.
Table H shows the spending categories with highest increases and decreases from 2017 to 2018. Gasoline and other energy goods top the “winners” list at 13.4 percent growth, followed closely by truck leasing at 13.2 percent. More people are affording vacations and travel as passenger fares for foreign travel are up 12.0 percent. Entertainment is a big winner with motion picture theater ticket sales up 11.4 percent, video streaming and rentals growing by 9.2 percent and newspapers and periodicals increasing 9.0 percent last year.
New auto sales top the list of “losers”, posting a 9.5 percent decline with second place going to spectator sports. Not surprisingly, land-line telephone services have declined by 6.7 percent – placing the spending category third on the list.
The latest comprehensive revisions by the BEA to the U.S. National Accounts have several significant takeaways. First, personal income appears to have been under-reported for years, especially from small businesses. Secondly, the revised savings rate for individuals is no longer at historic lows and is about average to the levels seen since 1990. Also, the relationship between personal spending and income is no longer at historic highs. This all means that our economy may have even more room for expansion than originally thought which should bode well for the furniture and home furnishings industries.